Strike a Global Trade Agreement

By Clive Crook -
Feb 11, 2013

President Barack Obama should renew
the U.S.’s historic commitment to a liberal order of global
trade by announcing two main priorities in his State of the
Union address. First, bring currency manipulation under
effective multilateral oversight. Second, promote global (as
opposed to regional) trade liberalization by developing a bold
post-Doha Round strategy.

The U.S. and other advanced economies have resorted to
unconventional methods of monetary expansion in recent years.
They were right to. However, near-zero interest rates and
quantitative easing have depressed their currencies and left
many developing countries, especially in Latin America, at a
trading disadvantage. The risk of competitive devaluation --
currency war -- is real, and with this danger come the dual
threats of excessive use of capital controls and outright
resorting to trade protection.

Currency policy is, among other things, a species of trade
policy, so the World Trade Organization should be given
effective oversight powers. When depreciation is a byproduct of
necessary steps to stimulate domestic demand, it can work to
everyone’s benefit. When it’s adopted to create an unfair
competitive advantage, it should be disciplined -- not by
governments acting unilaterally, but as part of an approved
international process. The WTO already has dispute-resolution
powers and remedies. Currency policy should be brought within
their remit.

The Doha Round of trade talks has stalled. Obama should
commit himself to salvaging what he can from the negotiations,
even if the comprehensive global deal once envisaged can’t be
done. Beyond this, the U.S. should lead the way in improving the
emerging new model of trade reform -- by ensuring that future
bilateral and regional trade agreements are open-ended. This
should be the rule: Countries willing to make the same
commitments and accept the same trade standards as existing
members should be admitted.

Obama should say that new trade deals will be framed, and
existing agreements revised, with this commitment to openness in
mind. Without this promise, regional trade agreements risk
distorting trade flows and even dividing the world into
competing blocs. With it, regional trade agreements can serve
the goal of genuinely liberal trade.

(Clive Crook is a Bloomberg View columnist. The opinions
expressed are his own. This is one of 11 suggestions Bloomberg
View columnists made for the foreign policy section of Barack
Obama's State of the Union address. Read more here.)

To contact the writer of this article:
Clive Crook at clive.crook@gmail.com.